AMD shares slid more than 4% Monday after HSBC downgraded the stock to Hold from Buy, but Jim Cramer fired back with a blunt counter: the CPU boom is just getting started.
"Advanced Micro has CPUs, and CPUs are what is being used by agents," Cramer said during the CNBC Investing Club's Morning Meeting. "So if you have them, this stock is going to go up much more." The clash comes one day before AMD reports first-quarter earnings after Tuesday's close, with analysts projecting revenue of $9.89 billion and earnings of $1.29 per share.
HSBC analyst Frank Lee cut the rating on valuation grounds. AMD has climbed more than 68% this year and roughly 258% over the past 12 months.
April alone marked the company's strongest month on record, with shares soaring 74% and hitting an all-time high of $362.79. The stock now trades at about 33 times estimated 2027 earnings, up from roughly 19 times previously. HSBC raised its price target to $340, but that still implies a modest downside from current levels.
Lee acknowledged AMD's consistent share gains in the server CPU market but warned the recent rally "has significantly raised market expectations over its server CPU growth momentum." Technical indicators reinforce the caution, AMD's 14-day relative strength index has climbed above 84, firmly in overbought territory.
Cramer's counterargument hinges on agentic AI, the next wave of autonomous systems that can complete tasks with limited human oversight. That shift, he argued, makes CPUs more critical than in the earlier stages of the AI spending boom, when GPUs dominated the narrative.
AMD makes both chips, but its CPU position gives it an edge Cramer believes the market is underappreciating.
HSBC also flagged a supply-chain concern. AMD relies on Taiwan Semiconductor Manufacturing Co. for production, and capacity constraints at the foundry are expected to persist through year-end. That limits AMD's ability to fully capitalize on demand. By contrast, Intel operates its own foundries, which HSBC said puts it in a better position to deliver upside surprises.
HSBC maintains a Buy rating on Intel.
Cramer dismissed that worry, arguing supply tightness reinforces the broader imbalance that supports AMD's pricing power. "I would not sell" shares of AMD, he said.
AMD reports earnings Tuesday. The company guided for revenue between $9.50 billion and $10.10 billion in the March quarter, keeping expectations within a narrow band.
Whether the stock can justify its 33x forward multiple depends on what management says about the quarters ahead, and whether agentic AI demand is as real as Cramer believes.
